GGG

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You’re Always Marketing So Keep It Classy

A few years ago, GGG was engaged in the restructuring of a multi-billion dollar company that had relationships with numerous and varied businesses and firms throughout the country. While focused on the client’s interest, I took this opportunity to make some excellent connections and solidify existing ones with professionals in a multitude of industries – even though we were most often on opposite sides of the table. I worked with many bankruptcy attorneys, private equity professionals and business leaders, developing excellent working relationships towards the restructuring of this company.

It’s important to recognize current business as opportunities for new business. Not only does this prepare you for the future but it motivates you to work harder on the current case.

Regardless of your profession or industry, look at each meeting, conference and project as a marketing opportunity. After all, you are good at what you do, and you want others to know this.

It’s not often in my profession that I get new business from existing or past clients because of the nature of the turnaround industry. However, more than half my future business comes from those with whom I’ve worked during a case, whose interests at the time are not those of my client. That is, many times I am hired for future situations by those who sat on the other side of the negotiations table. Even though we were on opposite sides of the situation, those who ultimately hire me one day appreciated the professionalism with which I carried myself, the thought process I used to resolve the case and the outcome I achieved for my side.

Subsequent to the case at hand, they have other clients who they want me to represent. Next time they see me in the courtroom or at the negotiations table, they want me to sit on their side. That is why I always stay fair to the other side in a business case and communicate clearly. Make it your duty to do the same. People appreciate knowledge, professional conduct and sound business ethics, and they like solving problems quickly and efficiently.

Mutual respect is the goal for long-term marketing in business. Always be honest and forthcoming – you don’t have to be the nice guy in a tough business deal, but having professional respect for your negotiating partners and gaining their respect is the recipe for growing your referral sources.

Some of my long term, twenty-year referral sources come from these situations in which I gave oppositional professionals’ clients a hair cut, but who later wanted to work with me.

Remember, you’re always marketing.

What are your primary sources of referrals? How do you cultivate those?

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Living the Lessons of Turnaround Success

Cash is King – Living the Lesson

In 2007, a large Southeast-based contractor called us at GGG for the usual reason: they were having a crisis. This call marked the beginning of an 18-month turnaround, during which the company regained its financial health to continue operating profitably.

For decades prior to 2007, business was booming. After many years of profitability, and coinciding with the broader economic decline in the USA, unprofitable long-term contracts with major customers resulted in severe declines in cash flow and ultimately the business overall. Its unsustainable position also put the operations of the utility company’s customers in jeopardy.

Business Facts, Not Beliefs – To the Bank, It’s All About the Money

Anxious about these alarming trends, the bank cut back on the company’s availability (they decreased the amount the company could borrow against their receivables), shrinking the cash available to operate. When we arrived, we were asked to act as advisors to find new financing opportunities, to streamline operations and to act as interim CFO.

Besides the unprofitable contracts and unfavorable cost structure, the company was operating in a saturated and highly competitive market. It therefore had limited ability to raise prices despite improved operations.

Banks, naturally, like to rely on numbers rather than hopes and promises. Thus, in order for any troubled company to get financing, the company needed to be fixed first. When it was clear to the bank through facts and data that the company has regained its stability and had long-term growth potential, the bank was more likely to provide additional funding.

What We Did

First thing was first – and I recommend this for you and your business – we renegotiated contracts that were generating losses and reengineered the cost structure to accommodate prevailing economic conditions. We worked with the company leadership to eliminate unprofitable product lines, renegotiated vendor debt, and executed on a forbearance agreement with the senior lender. We also solidified a long-term contract with a key customer.

You should always have controls to monitor your product lines, so as to avoid losing money (or too much money) in the first place. Don’t assume because something worked once it will continue to work.

One of our largest vendors (Big Gorilla) was paying every 90 days which was creating huge cash-flow problems. Implementing tighter credit criteria was a must. Consider your credit risk based on who you offer terms to and consider overhauling your system and reducing your risk. We introduced the requirement of collaterals or guarantees when necessary and shortened payment terms for the company’s customers across the board. Though most of our efforts with the company were geared towards creating cash flow, each of the above actions was necessary to ensure the company’s survival.

The Hard Part and the Happily Ever After

Despite the turnaround success and the awards and accolades GGG received for it, there were some expected difficulties. We had to lay off some people, remembering that despite being a tough thing to do, letting some workers go saved the jobs of many others.

As a result of our efforts, the company shifted from a significant loss to positive cash flow after 16 months. The bank debt was significantly reduced, and a new two-year bank loan was executed.

Due to the speed of the turnaround, the bank elected to extend the company’s credit. An important factor in the bank’s continued partnership was that we educated our banker about our turnaround efforts and successes. The bank was happy to maintain a client when it could see the signs of a positive transformation and have open lines of communication. Always make sure you communicate with your bank by following The CEO’s 10 C’s of Borrowing.

Currently the company has an excellent relationship with the bank that includes ongoing and honest communication. In fact, the company completed an acquisition in 2011 and its employees received raises across the board.

Lessons Transcending Industries

This case reinforced for me that 95% of any turnaround is not about specific knowledge regarding any particular widget or industry.

GGG had a lot of construction experience by this time, but only about 5% of the turnaround had to do with construction company issues. The rest had to do with basic blocking and tackling issues: watch your contracts, watch your cost, watch your headcount, negotiate with the bank.

You can hardly learn these important business lessons from a textbook – you learn them from getting the bloody noses that my partners and I got throughout our decades of experience.

How can we learn from this case?

When your numbers start getting soft or you start losing money, be proactive. If the company is highly leveraged, has a decreasing cash cushion and is maxed out on its credit, these are among the signs that it’s time to take more serious action.

None of us has a crystal ball to know exactly how long this current economic downturn will last. If you are seeing problems and intend to survive, restructure sooner.

Be proactive. Be decisive.

If you must let people go, do it in one confident move. If you have multiple layoff weeks or even months apart, you will demoralize your employees who will feel insecure in their positions. As CEO or leader, you need to be aware of the economic reality and act decisively based on them.

Whatever your business, face your harsh reality and be proactive.

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“Know Thyself” and Know Thy Weaknesses, Too

Growth begins when we start to accept our own weakness.

  • Jean Vanier

There’s little I find as useful in business as knowing my weaknesses. This applies to me as a person just as it applies to my business, GGG, and any business that I am leading or involved in.

It is in weaknesses that I find opportunities for growth or increased stability and future success.

As a human being, my partner in life – my wife – makes me a better person. I know my weaknesses, and I know that with and because of her, I will grow into a stronger person. I like to flatter myself by imagining that she feels the same about me, and that many healthy, enduring and strong relationships include this dynamic.

As a business leader, I find that it is best to surround myself with those who can do what I cannot. Whenever Grisanti, Galef & Goldress brings on a new associate or partner, we ensure that this person has skill sets and areas of expertise that are outside of what we already know, do and provide. In that way, our business and its services grow and evolve and we get stronger as a company.

Successfully bringing on someone who fits this bill begins with understanding our weaknesses as a company.

Similarly, when I am brought in to lead another company, I want to know where the weaknesses are. Considering the crisis situation a company is in when I’m brought on, no doubt the immediate weaknesses are apparent to me – as they are to others. However, it’s an analysis of everywhere else that the company is weak – and therefore vulnerable – that allows me to start shoring up those holes and preventing further and future catastrophe.

For instance, if I’m brought in to manage a cash crisis, but discover that a company’s key products have not evolved in two decades and are now competing in a saturated market, that’s a weakness that needs to be addressed and is no doubt linked to the cash crisis – or will be one day. If I learn that we have a Big Gorilla as a client, then I’m going to see how that potential crisis can be mitigated early as well. It’s knowing these weaknesses that help with current problems and stave off future ones.

Knowing your weaknesses allows you to address them and grow as a person, company and business leader. Face the harsh reality.

Want to learn the kinds of questions you should be asking yourself to face your harsh reality and learn where your weaknesses might be? Then read my 3 Part series (Part 1, Part 2, Part 3) and find out!

What are your weaknesses? How do you plan to deal with them?

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How to Keep Your Business Relevant and Growing

Sometimes it is more important to discover what one cannot do, than what one can do.

– Lin Yutang

I was recently asked in an interview how I grow my business, because the interviewer believed that this would help people garner some insight into what they could do to grow their businesses.

What came to mind is what I’ve been doing for years – and bear in mind that this applies to us in large part due to our nature as a firm, but it can no doubt be applied to many business types.

To grow my business – and stay relevant – I’m constantly evolving GGG. When I say evolving it means that I’m adding to the list of services we offer. For instance, we’ve recently added federal and state receiverships as part of our product mix – in addition to our standard turnaround services.

I keep us evolving not only by maintaining my qualifications and continually learning, but by hiring people who have different skill sets than my own and who thrive in different ways. It is this differing talent – and recognizing what I can’t do – that keeps GGG growing and evolving.

So how does this apply to your product-based business?

Evolve your offerings.

Don’t keep selling the same old things. Don’t be a one trick – or ten trick – pony. Diversify. Add new products and widgets. It helps, of course to make sure that these products are relevant to your market and that they are in accord with your brand, but pending those things, add and evolve.

Next, pitch them to your current client list. Offer a nice discount at the beginning if you want to move enough product to test its relevance.

See what kinds of new clients you can attract with this new product, skill, widget or offering. Perhaps these new clients also need some of the products and services you’ve always offered, but would never have found you had you not evolved by adding these new products and services.

An Evolutionary Example

I’ll give you a quick example. A company that sells Seat Belt Extenders was selling this product alone – in one color and one length. When sales started to dwindle a bit, they realized they needed to evolve. Of course they needed to kick it up on the advertising and they needed to streamline their processes and become more efficient, but they also needed to add products to their mix.

Not only did they diversify by adding different colors and lengths to their seat belt extender offerings – a great move and an easy way to evolve – but they also added a handful of related products, all of which were highly relevant to their existing market and clientele (for instance, seat belt adjusters, bags to hold the extenders, etc.).

Your evolution doesn’t have to be complicated and it doesn’t have to cost you a lot. Instead of thinking about what you’re already doing well, think about what you don’t do well and bring in the people with the skills or the products and services that will evolve your business and round out its offerings.

I would prefer to hire people who are smarter than I am, pay them more than I make, and let them have fancier titles. Don’t let egos get in the way when you bring on those who do what you can’t.

How do you keep growing your business? How do you evolve? What products and services have you added?

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I’m Lee N. Katz and It’s Nice to Meet You

Allow Me to Introduce Myself

My name is Lee N. Katz, and I’ve specialized in turning companies around for more than 25 years. In 1986, I joined Grisanti, Galef & Goldress (GGG), one of the oldest turnaround consulting firms in the United States. In 1997, I became the managing partner.

Throughout my career in crisis management, I’ve served as an interim executive officer and reorganization director for both large and small companies, public and private, with annual revenues from $5 million up to $3 billion. In addition to offering expert-witness testimony regarding business valuations, turnarounds, and plan feasibilities, and I’ve served on court-appointed federal and state receiverships.

I love using my skills to help owners, CEOs and boards of directors prevent crises from happening, but no one ever seems to know a crisis is happening before the roof gets blown off the barn. And that’s when I step in.

In the 70s I worked for First National Bank of Atlanta, eventually directing their asset-based lending in the Atlanta area. I’ve also spent quite a bit of time developing and managing commercial real estate for end users like Wal-Mart, John Wieland Homes, and other private investor groups.  I’ve renegotiated more than $1 billion in real estate leases and handled numerous environmental issues for real estate and corporate manufacturing clients. Sometimes I do this in cooperation with state and national Environmental Protection Agency authorities.

I often serve as a financial advisor to individuals and trusts.

Specialties

People often ask me what I specialize in, so I thought I’d toss the short list your way:

  • Financial Restructuring
  • Bankruptcy and Bankruptcy Restructuring
  • Real Estate Receiverships, both Federal and State
  • Operating Company Receiverships, both Federal and State
  • Restructuring Bank Debt with the FDIC and Successor Banks
  • Asset Liquidations
  • Alternative Restructures to Bankruptcy
  • FDIC Negotiations
  • Corporate Due Diligence
  • Bond Restructuring
  • Financial Advising to Bond Funds
  • Corporate Downsizing

Some Public Recognition

For those of you who are kind enough to be interested, my firm, GGG, has been recognized by the Turnaround Management Association’s (TMA) Atlanta Chapter:

• 2008 Small Company Turnaround of the Year Benton-Ga, Inc. Learn More
• 2004 Non-Profit Company Turnaround of the Year – Life University Inc. Learn More
• 2003 Large Company Turnaround of the Year – P.S. Energy Corp.
• 2002 Large Company Turnaround of the Year – Wyncom Inc. Learn More

So, that’s a bit about me.

Now you know who’s writing this blog. If you have any questions about these things or if there’s anything general that I can answer for you, please don’t hesitate to ask in the comments.